University  of  California  •  Berkeley 


RAILROAD  BILL-ITS  MANY  MERITORIOUS 
PROVISIONS-FUTURE  STIFLING  OF  WATER 
COMPETITION  BY  RAILROADS  PREVENTED 


SPEECH  OF 

u/y^ 

HON.  JOSEPH  R.  KNOWLAND 


OIF1 


IN   THE 


HOUSE  OF  REPRESENTATIVES 


TUESDAY,  APRIL  19,  1910 


1910 


SPEECH 


OF 


HON.  JOSEPH  E.  KNOWLAND. 


The  House  being  in  Committee  of  the  Whole  House  on  the  state  of 
the  Union  and  having  under  consideration  the  bill  (H.  R.  17536)  to 
create  an  interstate-commerce  court,  and  to  amend  the  act  entitled  "An 
act  to  regulate  commerce,"  approved  February  4,  1887,  as  heretofore 
amended,  and  for  other  purposes — 

Mr.  KNOWLAND  said : 

Mr.  CHAIRMAN:  The  Committee  on  Interstate  and  Foreign 
Commerce  which  reported  the  pending  bill  consists  of  18  mem- 
bers, and  of  that  number  all  but  two  are  lawyers.  I  am  one 
of  the  two  not  of  the  legal  profession,  but  after  attending  the 
exhaustive  hearings  upon  the  measure  now  under  discussion, 
which  began  on  the  18th  day  of  January  and  continued  until 
the  1st  day  of  March,  when  the  committee  in  executive  session 
took  up  the  consideration  of  the  bill  section  by  section  and  line 
by  line,  I  consider  myself  almost  qualified  to  apply  for  admis- 
sion to  the  bar. 

Without  betraying  any  confidences  or  divulging  committee  se- 
crets, I  might  announce  that  I  have  made  the  startling  discov- 
ery that  occasionally  even  lawyers  fail  to  agree  as  to  their  in- 
terpretations of  the  law,  as  well  as  upon  questions  of  policy,  and 
when  such  contingencies  arose,  and  the  committee  divided  about 
equally,  it  devolved  upon  the  laymen  to  cast  the  deciding  vote. 
If  modesty  did  not  forbid,  I  would  say  confidentially  to  the 
Members  of  the  House  that  the  most  meritorious  provisions  of 
the  pending  bill  can  of  course  be  traced  to  contingencies  of  this 
character.  [Laughter.] 

The  bill  is  a  fulfillment  of  the  pledges  of  the  Republican  plat- 
form of  1908,  which  declared,  in  referring  to  rate  legislation : 

We  believe  the  interstate-commerce  law  should  be  further  amended, 
so  as  to  give  the  railroads  the  right  to  make  and  publish  tariff  agree- 
ments subject  to  the  approval  of  the  commission,  but  maintaining  al- 
ways the  principle  of  competition  between  naturally  competing  lines 
and  avoiding  the  common  control  of  such  lines  by  any  means  whatso- 
ever. We  favor  such  national  legislation  and  supervision  as  will  pre- 
vent the  overissue  of  stocks  and  bonds  by  interstate  carriers. 

The  pending  measure  also  carries  out  the  recommendations  of 
President  Taft  in  his  message  to  this  body  on  January  7  last, 
in  which  he  specifically  advocated  the  creation  of  a  commerce 
court;  the  right  of  railroads  to  make  and  publish  tariff  agree- 
ments; that  railroads  be  compelled  to  quote  correct  rates  in  writ- 
ing when  requested  by  shippers;  that  the  commission  be  granted 
power  to  act  on  its  own  initiative  in  investigating  the  fairness 
of  an  existing  rate  or  practice,  and  giving  it  the  additional 
power,  when  an  increased  rate  is  filed,  to  enter  upon  an  in- 
vestigation of  the  proposed  schedule  before  it  goes  into  effect; 
that  shippers  have  the  privilege  of  routing;  that  railroads  be 
39280—8903  8 


inhibited  from  acquiring  competing  carriers,  and  that  legisla- 
tion be  enacted  to  prevent  the  overissue  of  stocks  and  bonds. 

The  bill  likewise  embodies  practically  all  the  recommendations 
which  the  Interstate  Commerce  Commission  has  made  to  Con- 
gress. 

The  commission,  in  their  report  for  1909,  say,  touching  the 
question  concerning  the  prevention  of  advances  in  rates  pend- 
ing investigation: 

It  seems  plain  to  us  also  that  some  method  should  be  provided  by 
which  railroads  can  be  prevented  from  advancing  their  rates  or  chang- 
ing their  regulations  and  practices  to  the  disadvantage  of  the  shipper, 
pending  an  .investigation  into  the  reasonableness  of  the  proposed  change. 

We  have  embodied  in  section  9  of  the  bill,  amending  section  15 
of  the  present  law,  language  to  carry  out  this  recommendation, 
and  to  which  I  will  later  refer. 

In  the  matter  of  establishing  through  routes  the  report  con- 
tains the  following  language: 

This  commission  now  has  authority  to  establish  a  through  route  and 
joint  rate  "  provided  no  reasonable  or  satisfactory  through  route  exists." 

And  suggest  that  this  proviso  should  be  eliminated,  which 
the  committee  has  done  in  section  9,  and  the  commission  adds 
as  a  further  argument  in  favor  of  striking  out  this  proviso : 

We  think  the  commission  should  have  authority  to  establish  through 
routes  and  joint  rates  wherever,  upon  investigation,  it  is  found  that 
the  public  necessity  and  convenience,  having  due  reference  to  the  inter- 
ests of  the  carrier,  require  such  action. 

Touching  the  right  of  the  shipper  to  route  freight,  the  com- 
mission says: 

There  are,  however,  circumstances  under  which  the  privilege  of  desig- 
nating the  route  by  which  the  traffic  shall  move  is  a  matter  of  con- 
venience as  well  as  value  to  the  shipper,  and  under  such  circumstances 
his"  right  ought  to  be  protected. 

In  section  9  of  the  bill,  amending  section  15  in  the  original 
act,  we  carry  out  this  recommendation. 

Upon  the  question  of  orders  in  proceedings  instituted  by  the 
commission  the  following  language  is  used : 

We  believe  that  wherever  it  appears,  either  from  a  formal  complaint 
filed  or  from  informal  complaint  received  or  from  the  general  knowledge 
of  the  commission,  that  a  given  situation  ought  to  be  investigated,  the 
commission  should  have  authority,  upon  its  own  motion  or  by  modifying 
a  complaint  already  filed,  to  prosecute  an  adequate  inquiry  upon  notice 
to  the  carrier  and  to  make  a  relieving  order  if  one  be  required. 

In  section  8b  of  the  bill  we  have  carried  out  this  recommenda- 
tion. 

Sections  13,  14,  and  15  of  the  pending  measure  deal  with  the 
question  of  the  overcapitalization  of  railroads,  which  the  com- 
mission direct  attention  to  in  the  following  language : 

The  need  of  exercising  control  over  railway  capitalization  is  again 
urged  upon  the  attention  of  Congress. 

It  is  my  purpose  to  discuss  the  bill  from  the  standpoint  of 
the  practical  business  man,  dwelling  upon  those  features  which, 
in  my  opinion,  tend  to  very  materially  strengthen  existing 
statutes  upon  the  general  subject  of  railroad  regulation,  curing 
defects  which  time  and  experience  have  brought  to  light,  and 
meeting  present  conditions.  The  most  progressive  railroad  men 
to-day  are  free  to  acknowledge  that  they  would  oppose  the  re- 
peal of  the  Hepburn  Act,  frankly  admitting  that  it  has  proved 
39280—8953 


5 

of  value  in  encouraging  honest  railroad  management,  breaking 
up  practices  which,  in  many  instances,  the  railroads  were  forced 
to  resort  to  by  shippers  in  order  to  obtain  and  hold  business, 
the  culpability  of  shippers  being  as  great  as  that  of  carriers. 

As  I  personally  view  the  commerce-court  provision,  if  a  tri- 
bunal of  this  character  will  tend  to  expedite  the  adjudication 
of  cases  affecting  the  question  of  rates,  which  will  be  to  the  in- 
terest of  the  shipper;  if  it  will  mean  the  creation  of  a  body  of 
experts  peculiarly  qualified  to  deal  with  the  great  problems  of 
transportation,  one  of  the  most  intricate  subjects  before  the 
American  people  to-day,  affecting  as  it  does  every  line  of  busi- 
ness; if  it  will  result  in  a  greater  uniformity  of  decisions — 
then,  I  say,  such  a  court  should  be  given  a  fai-r  trial.  For  my 
part  I  am  willing  to  accept  the  judgment  of  President  Taft 
upon  this  most  important  feature  of  the  pending  bill,  for  few 
men  have  had  wider  judicial  experience  and  are  as  well  quali- 
fied to  speak  touching  the  necessity  for  such  a  court. 

Mr.  SIMS.  May  I  ask  the  gentleman  to  give  the  authority 
seeking  to  create  a  court  of  that  character? 

Mr.  KNOWLAND.  I  am  glad  the  gentleman  has  risen,  be- 
cause I  wanted  to  call  attention  to  the  fact  that  when  my  col- 
league from  Tennessee  was  upon  the  floor  the  other  day,  in 
answer  to  a  question  by  the  gentleman  from  Texas  [Mr.  GILLES- 
PIE],  in  which  the  gentleman  from  Texas  asked  if  the  Inter- 
state Commerce  Commission  wanted  this  special  court,  and  if  he 
knew  whether  the  commission  had  made  any  recommendations, 
the  gentleman  from  Tennessee  replied: 

I  certainly  do  not,  and  I  defy  any  man  to  find  any  evidence  in  the 
hearings  that  points  that  out. 

I  accept  the  challenge  of  the  gentleman  from  Tennessee,  and 
will  quote  from  the  testimony  of  Mr.  Knapp,  chairman  of  the 
Interstate  Commerce  Commission,  which  he  gave  when  before 
the  Committee  on  Interstate  and  Foreign  Commerce,  as  found 
on  page  1225  of  the  hearings: 

Mr.  WASHBURN.  Then  may  I  ask  you  to  outline  briefly  the  reasons 
which  have  led  the  commission  to  the  conclusion  that  the  creation  of 
this  court  is  desirahle? 

Mr.  KNAPP.  In  answer  to  your  question  I  should  like  to  be  definitely 
understood  as  giving  expression  only  of  my  personal  views. 

I  regard  the  creation  of  a  tribunal  of  this  sort  as  highly  important. 
There  are  many  reasons  which  bring  me  to  that  conclusion.  The 
rather  fundamental  reason  is  grounded  in  the  fact  that  these  are  all 
questions  of  national  scope  and  interest.  They  are  in  no  sense  the 
local  and  isolated  questions  which  arise  in  the  ordinary  courts.  It 
is  important  that  there  be  one  tribunal  of  first  instance  which  shall 
pass  upon  all  these  questions  so  that  the  determination  will  be  har- 
monious and  consistent,  and  not  as  it  is  now,  uncertain  and  conflicting 
in  different  parts  of  the  country. 

Mr.  SIMS.  Does  he  not  distinctly  disclaim  speaking  for  the 
commission? 

Mr.  KNOWLAND.  He  does  in  what  he  says  personally,  but 
calls  attention  to  the  fact  of  the  commission's  indorsement  of 
the  commerce-court  provision,  and  then  he  goes  on  to  state 
that  he  gives  his  reasons,  which  can  only  be  considered  as 
personal  reasons  and  not  the  reasons  which  actuated  the  In- 
terstate Commerce  Commission  in  indorsing  the  commerce- 
court  provision. 

Mr.  WANGER.     Will  my  colleague  permit  a  question? 
39280—8953 


6 

Mr.  KNOWLAND.     Certainly. 

Mr.  WANGER.  Is  it  not  a  fact  that  prior  to  the  statement 
by  Chairman  Knapp,  in  answer  to  Mr.  WASHBURN,  he  an- 
nounced to  the  committee  the  action  of  the  Interstate  Commerce 
Commission  formally  and  officially  taken  in  approbation  of  the 
provision  for  the  commerce  court? 

Mr.  KNOWLAND.  I  am  pleased  to  say  that  my  colleague  is 
absolutely  right  about  that. 

Mr.  WANGER.  Subject,  however,  to  the  recommendation  in 
favor  of  the  appointment  of  the  judges  by  the  President  as  the 
other  judges  of  the  United  States  courts  are  appointed. 

Mr.  KNOWLAND.  The  very  contention  the  gentleman  from 
Tennessee  made  the  other  day  in  his  opposition  to  the  measure. 
He  wanted  to  know  why  the  President  should  make  the  ap- 
pointments instead  of  the  judges  being  appointed  in  the  first 
instance,  or  designated  by  the  Chief  Justice,  while  the  Inter- 
state Commerce  Commission  strongly  recommended  that  these 
first  judges  be  appointed  by  the  President  and  not  by  the  Chief 
Justice,  as  contended  by  the  gentleman. 

Mr.  SIMS.    You  mean  designated,  not  appointed. 

Mr.  KNOWLAND.     Yes:  designated. 

Mr.  SIMS.  I  understood  the  gentleman  from  Texas  to  say: 
"Does  the  commission  ask  for  this  court?"  I  fail  to  find  the 
commission  have  ever  asked  for  it. 

Mr.  KNOWLAND.  There  is  no  very  great  distinction  be- 
tween indorsing  a  proposition  absolutely  and  asking  for  it. 

Mr.  SIMS.  Here  is  what  I  wanted  to  convey:  That  the 
commerce  court  was  not  a  suggestion  made  up  by  that  commis- 
sion; that  they  were  not  the  fathers  of  the  idoa;  that  it  was 
explained  that  Mr.  TOWNSEND  of  Michigan  was  the  father  of 
the  idea;  and  I  said  that  it  made  me  think  more  of  it. 

Mr.  KNOWLAND.  While  I  do  not  claim  that  the  commission 
fathered  the  idea,  they  strongly  approved  it. 

Mr.  SIMS.  Well,  I  do  not  think  the  gentleman  will  give  very 
much  weight  to  that.  The  reasons  given  by  a  commission  which 
can  be  removed  and  enlarged. 

Mr.  KNOWLAND.  Evidently  the  gentleman  who  asked  the 
question  of  the  gentleman  from  Tennessee  the  other  day  gave 
weight  to  that,  otherwise  he  would  not  have  put  the  question 
as  he  did.  He  wanted  to  know  if  it  was  not  a  fact  that  the 
commission  had  indorsed  the  proposition,  or  agreed  to  it,  or 
had  approvect  it,  and  the  gentleman  immediately  replied  that 
such  was  not  the  case. 

Mr.  SIMS.    I  said  it  had  not. 

Mr.  KNOWLAND.  Yes.  The  gentleman  had  overlooked 
just  what  Commissioner  Knapp  had  said  on  this  particular 
point. 

Mr.  SIMS.    I  state  frankly  I  do  not  recall  that 

Did  not  Commissioner  Clements  in  his  testimony  before  that 
state  that  he  was  absolutely  opposed  to  their  being  designated 
by  either  the  Chief  Justice  or  the  President  to  serve  in  this 
particular  court? 

Mr.  ADAMSON.    Will  the  gentleman  yield  to  me? 

The  CHAIRMAN.  Does  the  gentleman  yield  to  the  gentle- 
man from  Georgia? 

Mr.  KNOWLAND.     I  do. 
39280—8953 


Mr.  AD  AM  SON.  Mr.  Chairman,  I  can  not  hear  very  much  of 
what  is  being  said.  I  suppose  it  is  the  modesty  of  gentlemen 
which  causes  them  to  speak  in  such  soft  voices  that  we  back  in 
the  suburbs  can  not  hear  them.  Do  I  understand  the  gentleman 
from  California  to  be  insisting  that  the  Interstate  Commerce 
Commission  want  this  commerce  court? 

Mr.  KNOWLAND.  Mr.  Chairman,  I  am  simply  quoting  the 
testimony  before  the  committee,  in  which  Chairman  Knapp 
advances  some  of  the  strongest  arguments  that  have  been  ad- 
vanced in  any  quarter  in  favor  of  the  creation  of  the  court. 

Mr.  ADAM  SON.  I  listened  carefully  to  the  hearings  for 
two  or  three  months  and  have  associated  with  the  members  of 
the  Interstate  Commerce  Commission,  and  while  Chairman 
Knapp  did  make  a  perfunctory  statement  of  that  sort,  I  have 
never  found  that  the  members  of  the  commission  were  en- 
thusiastic for  this  slaughter  of  the  commission. 

Mr.  KNOWLAND.  The  gentleman,  then,  is  questioning  the 
good  faith  of  the  gentlemen  of  the  commission.  If  they  indorse 
it,  as  the  gentleman  claims,  and  do  not  mean  what  they  say, 
then  I  claim  this  is  a  reflection  upon  the  Interstate  Commerce 
Commission. 

Mr.  ADAMSON.  I  am  neither  questioning  the  good  faith  of 
the  commission  nor  of  the  gentleman  from  California;  but  I 
say,  as  a  Member  who  heard  the  evidence  and  who  has  associ- 
ated with  the  commission,  that  I  fail  to  discover  that  the  com- 
mission want  this  court. 

Mr.  KNOWLAND.  Mr.  Chairman,  I  leave  to  the  Members 
of  the  House  for  their  interpretation  the  statement  of  Chairman 
Knapp,  of  the  Interstate  Commerce  Commission.  If  languuge 
can  be  stronger  in  approval  of  any  proposition,  then  I  ask  the 
gentleman  to  point  out  where  such  language  has  been  used  in 
favor  of  this  bill. 

Mr.  ADAMSON.  I  admit  the  commission  want  it  as  much  as 
the  railroads  oppose  it. 

Mr.  SIMS.  The  gentleman  did  not  answer,  though,  as  to 
what  shipper  could  bring  a  suit  in  this  court. 

Mr.  KNOWLAND.  It  is  true  a  shipper  can  not  bring  a  suit, 
but,  as  I  claimed,  it  is  important  to  him  that  suits  brought  by 
the  railroads  be  expedited. 

From  the  standpoint  of  the  shipper,  one  of  the  most  important 
provisions  of  the  bill  is  found  in  section  8,  and  relates  to  the 
quotation  of  rates.  There  is  scarcely  a  Member  of  this  House 
who  has  not  had  brought  to  his  direct  attention  cases  where 
shippers  have  met  with  losses,  or  suffered  great  annoyance,  by 
reason  of  erroneous  quotations  on  the  part  of  carriers.  One 
case  cited  before  the  committee  where  the  quotation  of  an  in- 
correct rate  resulted  in  damage -was  that  of  a  firm  in  Johnstown, 
Pa.,  which  had  a  shipment  of  rails  for  Whittier,  N.  C.  They 
wired  to  Pittsburg  for  a  quotation,  received  an  answer  by  wire, 
later  confirmed  by  letter.  A  reference  to  the  published  tariff 
by  the  shipper  confirmed  the  rate,  and  the  sale  was  consum- 
mated, based  on  the  rate  quoted.  Before  the  rails  were  shipped, 
however,  the  firm  was  notified  that  the  rate  had  been  quoted  in 
error.  The  agent  informed  the  shipper  that  an  amendment  had 
been  made  to  the  tariff  advancing  the  rate  $2  a  ton,  and  the 
39280—8953 


8 

firm  stood  a  loss  of  $1,500.  There  was  no  recourse,  as  the  com- 
mission could  not  authorize  the  railroad  to  refund  the  amount, 
for  to  do  so  would  necessitate  the  recognition  of  a  rate  which 
was  not  legal  at  the  time  of  the  shipment.  Innumerable  other 
cases  were  cited.  It  is  of  the  utmost  importance  to  a  shipper 
that  a  correct  rate  be  quoted.  «. 

In  many  instances  large  sales  are  lost  because  the  rate  erro- 
neously quoted  by  the  agent  of  a  carrier  was  in  excess  of  the 
correct  rate,  which  correct  rate  was  perhaps  quoted  to  a  com- 
petitor seeking  to  sell  the  same  class  of  goods  to  the  same 
customer.  It  is  provided  in  this  section  that  a  common  carrier 
upon  written  request  must  state  the  correct  rate  in  writing  be- 
tween given  points,  and  is  under  a  penalty  of  $250  if  the  firm 
or  company  making  such  request  suffers  damage. 

Of  equal  importance  to  the  shipper  is  the  provision  which 
enables  the  Interstate  Commerce  Commission  to  institute  an 
inquiry,  on  its  own  motion,  as  to  the  fairness  of  an  existing  rate 
or  practice.  While  under  existing  law  the  commission  had 
authority  to  investigate,  it  was  questionable  on  the  part  of  the 
commission  whether  under  the  fifteenth  section  it  could,  after 
investigation,  apply  any  remedies.  It  is  a  protection  to  the 
small  shipper  who  may  not  be  able  to  go  to  the  expense  of 
instituting  a  complaint,  or  may  not  have  the  knowledge  that 
a  rate  is  excessive.  The  provision  goes  still  further  in  the  in- 
terest of  the  shipper.  When  a  schedule  is  filed  with  the  com- 
mission stating  a  new  individual  or  joint  rate,  fare,  or  charge, 
the  commission  is  given  authority  upon  its  own  initiative  with- 
out complaint  to  suspend  the  operation  of  the  rate,  fare,  or 
charge,  for  a  period  of  one  hundred  and  twenty  days  while  it 
enters  upon  a  hearing  as  to  the  fairness  or  reasonableness  of 
the  proposed  schedule.  Now,  it  can  not  investigate  a  rate 
until  it  becomes  effective. 

Another  very  meritorious  provision  is  that  which  confers  upon 
the  commission  authority  to  establish  through  routes  and  joint 
classifications  and  rates.  Under  the  present  law  only  such  au- 
thority is  granted  where  a  satisfactory  through  route  does  not 
already  exist.  In  other  words,  a  through  route  might  be  estab- 
lished with  a  water  line  and  there  be  a  competing  water  carrier, 
but  the  railroad,  having  an  understanding  with  the  particular 
water  carrier,  would  refuse  to  establish  relations  with  the  com- 
peting water  line,  in  time  possibly  driving  it  out  of  business. 
The  same  would  be  true  of  a  competing  railroad  seeking  through 
traffic  arrangements. 

In  the  making  of  through  routes  we  provide  in  the  bill  in 
another  section  that  the  railroad  shall  afford  reasonable  facili- 
ties for  operating  such  through  routes,  and  exchange,  inter- 
change, and  return  cars,  fair  compensation  to  be  provided  for 
the  use,  injury,  or  destruction  of  such  cars. 

One  of  the  most  important  privileges  granted  the  shipper  is 
that  which  gives  to  him  the  right  of  routing  his  freight  where 
two  or  more  routes  now  exist.  It  was  believed  that  this  right 
belonged  to  the  shipper  prior  to  the  decision  of  the  Supreme 
Court  in  what  is  known  as  the  Citrus  Fruit  case  (200  U.  S., 
536).  The  right  of  the  shipper  to  route  is  of  great  importance 
for  many  reasons.  In  the  case  of  perishable  fruits — and  Cali- 
fornia is  vitally  interested  in  this  phase  of  the  question — it  is 
39280—8953 


important  in  routing  to  consider  climatic  conditions  and  quick 
dispatch.  In  many  large  cities  certain  roads  have  convenient 
terminal  facilities,  which  offer  great  advantages  to  the  consignee 
in  handling  the  goods  after  receipt,  frequently  saving  him  con- 
siderable expense.  It  is  important  also  to  shippers  to  know  just 
what  route  his  freight  is  taking  in  order  to  expedite  its  move- 
ment. He  can  keep  in  touch  with  its  progress.  Frequently 
a  shipment  arrives  on  one  line  when  expected  over  another,  and 
unnecessary  delay  results.  Without  this  privilege  the  shipper 
may  be  compelled  to  patronize  roads  in  bad  physical  condition, 
which  would  mean  delay  in  the  movement  of  freight.  With  the 
privilege  of  routing  in  the  hands  of  the  shipper  there  will  be 
less  incentive  on  the  part  of  the  roads  to  attempt  pooling.  There 
results  greater  competition  among  roads  for  business  with  the 
power  of  routing  in  the  hands  of  the  man  who  ships,  and  such 
competition  insures  improved  service. 

From  my  point  of  view  I  regard  section  12  as  one  of  the  most 
important  sections  of  the  bill — a  bold  step  in  the  direction  of 
preventing  the  future  stifling  of  competition  by  the  common 
carriers  of  the  country.  As  the  section  comes  from  the  House 
committee  it  goes  much  further  than  contemplated  originally, 
and,  what  is  more,  features  considered  objectionable  and  tend- 
ing to  weaken  the  section  have  been  eliminated.  The  original 
section  provided,  and  the  Senate  bill  provides,  that  no  railroad 
corporation  which  is  a  common  carrier  subject  to  the  act  to 
regulate  commerce  shall  hereafter  acquire,  directly  or  indi- 
rectly, any  interest  of  whatsoever  kind  in  the  capital  stock  of 
any  railroad,  or  purchase  or  lease  any  railroad  which  is  di- 
rectly and  substantially  competitive  with  that  of  such  first- 
named  corporation. 

The  House  committee  added  water  carriers  to  the  inhibition 
by  adopting  the  amendments  which  I  proposed  to  the  section. 
In  other  words,  as  the  section  now  reads,  no  railroad  corpora- 
tion can  acquire  capital  stock  in,  or  purchase  or  lease,  a  com- 
peting water  line,  nor  can  a  water  line  acquire  a  competing  rail- 
road. After  July  1,  1911,  no  officer  or  director  of  a  railroad  or 
water  carrier  can  serve  as  an  officer  or  upon  the  board  of 
directors  of  a  competing  line. 

Water  competition  is  the  most  powerful  and  dangerous  rival 
the  railroads  are  called  upon  to  meet,  and  it  necessarily  follows 
that  whenever  and  wherever  the  opportunity  is  offered  to 
strangle  that  competition  the  shrewd  business  men  who  man- 
age our  great  railroads  are  going  to  attempt  to  control  these 
water  lines  either  by  purchase  or  lease.  We  are  spending  mil- 
lions upon  our  waterways.  The  River  and  Harbor  Committee  of 
this  House  has  announced  a  policy  of  annual  appropriations. 
The  bill  just  reported  from  the  Senate  committee  carries  a  total 
of  over  .$52,000,000  in  appropriations  and  authorizations  for 
rivers  and  harbors.  Since  1896,  covering  a  period  of  fourteen 
years,  the  total  amounts  actually  expended  for  river  and  harbor 
improvements  by  the  Government  of  the  United  States  have 
aggregated  a  grand  total  of  $295,648,021. 

Four  hundred  million  dollars,  in  round  numbers,  will  be  the 
total  cost  of  the  Panama  Canal.  Will  there  accrue  to  the  Na- 
tion benefits  commensurate  with  such  vast  expenditures?  Not 
unless  we,  as  Representatives  of  the  people,  enact  legislation 

39280—8953 


10 

that  will  curb  the  power  of  the  railroads  to  destroy  the  water 
competition  which,  by  the  expenditure  of  these  millions,  we  are 
seeking  to  develop.  From  every  section  of  the  country  can  be 
cited  innumerable  cases  where  attempts  are  being  made  to  de- 
prive the  people  of  the  advantages  of  water  competition.  I 
am  going  to  mention  a  few  cases  that  have  been  brought  per- 
sonally to  my  attention. 

The  Louisville  and  Nashville  Railroad  controls,  it  is  claimed, 
all  freight  and  passenger  boats  plying  upon  the  Green  and 
Barren  rivers,  the  termini  being  Bowling  Green,  Ky.,  and 
Evansville,  Ind.  This  is  a  territory  served  almost  entirely 
by  the  Louisville  and  Nashville  Railroad.  The  rates  for  the 
distance  carried,  I  am  reliably  informed,  are  the  highest  of 
any  water  line  of  the  entire  Mississippi  Valley.  The  same 
condition,  perhaps  to  a  lesser  extent,  applies  upon  the  traffic 
of  the  Tennessee  River,  this  same  railroad  being  an  impor- 
tant factor  in  the  ownership  of  the  St.  Louis  and  Tennessee 
River  Packet  Line,  there  b,eing,  I  am  told,  little  conflict  as 
to  rates.  Practically  all  the  steamboat  lines  from  Baltimore 
to  the  Maryland  Peninsula  are  under  the  control  of  the  New 
York,  Philadelphia  and  Norfolk  Railroad  Company.  The  Dela- 
ware and  Raritan  Canal  has  been  practically  put  out  of  service, 
and  the  steamship  lines  to  the  Eastern  Shore  are  now  under 
the  single  control  of  the  railroad  just  mentioned. 

On  the  Atlantic  coast  there  is  called  to  my  attention  the  case 
of  the  Montauk  Steamship  Company,  which  until  quite  recently 
was  an  independent  corporation,  in  competition  with  the  Long 
Island  Railroad  Company  between  New  York  City  and  the  ter- 
minal points  of  Sag  Harbor,  Greenport,  Sea  Cliff,  and  other 
towns  touched  by  both  the  railroads  and  steamship  company. 
Since  the  acquisition  by  the  railroad  of  the  only  water  com- 
petitor it  is  claimed  freight  rates  have  advanced.  Along  the 
New  England  coast  the  control  of  competing  water  carriers  by 
the  railroads  is  notorious.  As  a  specific  instance,  an  unsuccess- 
ful struggle  was  carried  on  for  a  number  of  years  by  the  Enter- 
prise Line  plying  between  Providence,  Fall  River,  and  New 
York  in  competition  with  the  Fall  River  Line,  of  the  New  Eng- 
land Navigation  Company,  controlled  by  the  New  York,  New 
Haven  and  Hartford  Railroad. 

In  a  recent  opinion  delivered  by  the  Interstate  Commerce 
Commission,  from  which  I  quote,  in  the  case  of  W.  J.  Jennison 
Company  v.  Great  Northern  Railway  Company,  the  commission 
sets  forth  certain  facts  which  strikingly  illustrate  the  effect 
upon  rates  resulting  from  the  acquisition  of  water  carriers  by 
railroads : 

Certain  railroads  with  lines  reaching  from  Chicago  to  the  seaboard, 
or  from  Buffalo  to  the  seaboard,  own  and  control  practically  all  of  the 
railroad  mileage  between  Chicago  and  the  seaboard,  and  also  own  or 
control  all  of  the  regular  lines  of  package-freight-carrying  boats  on  the 
Great  Lakes.  Therefore  practically  all  of  the  tonnage  of  wheat  and 
wheat  products  that  is  transported  either  all-rail  or  lake-and-rail,  or 
rail-lake-and-rail  from  Minneapolis  or  Duluth  to  the  seaboard  or  to  New 
England  is  transported  in  whole  or  in  part  by  these  carriers. 

Prior  to  the  absorption  of  the  lake  lines  the  rail-lake-and-rail  and 
lake-and-rail  rates  on  flour  had  fluctuated  considerably,  but,  in  general, 
the  rail-lake-and-rail  rate  was  a  well  understood  and  established  differ- 
ential of  5  cents  per  100  pounds  under  the  all-rail  rate.  Early  in  1898, 
after  the  railroads  had  secured  control  of  most  of  the  lake  lines,  that 
differential  was  narrowed  to  3  cents  by  increasing  the  rail-lake-aud-rail 
39280—8953 


11 

rate,  and  in  April,  1902,  after  the  railroads  had  completed  their  control 
of  the  lake  lines,  it  was  narrowed  to  2  cents  by  another  increase  in  the 
rail-lake  and-rail  rate.  Sixty-five  per  cent  of  the  product  of  the  Min- 
neapolis mills  that  goes  to  the  territory  east  of  Buffalo  or  Pittsburg  ia 
shipped  rail-lake-and  rail. 

On  the  Pacific  coast  a  number  of  the  lines  between  San  Fran- 
cisco and  points  in  Oregon  and  Washington  are  controlled  by 
railroads  which  are  in  competition.  Between  San  Francisco 
and  New  York,  on  the  Pacific  side,  it  has  been  generally  under- 
stood that  the  transcontinental  railroads  control  the  Pacific 
Mail  Line. 

In  this  connection  I  want  to  say  that  while  it  is  generally 
claimed  that  the  Southern  Pacific  Railroad  controls  a  majority 
of  the  stock  of  the  Pacific  Mail  Line,  in  all  fairness  I  want  to 
quote  the  testimony  of  the  general  manager,  who,  although  he 
does  not  deny  that  the  Southern  Pacific  controls  the  steamship 
line,  made  this  statement  before  the  Committee  on  Interoceanic 
Canals  of  the  Senate,  in  March  of  this  year : 

I  would  like  to  say  here,  under  oath,  that  for  the  years  I  have  been 
in  the  Pacific  Mail  Steamship  Company  no  officer  of  the  Southern 
Pacific  Company,  or  any  affiliated  interest,  either  an  operating  officer, 
traffic  officer,  or  an  executive  officer,  has  ever  in  any  way,  shape,  form, 
or  description  given  me  any  instructions  in  regard  to  the  amount  of  ton- 
nage I  should  handle  of  the  traffic  of  the  Pacific  Mail,  or  attempted  in 
any  way,  shape,  form,  or  description  to  influence  my  judgment  in  regard 
to  the  amount  of  business  by  that  route. 

I  simply  make  this  statement  as  a  matter  of  fairness  to  Mr. 
Schwerin.  I  want  to  say,  however,  that  while  it  is  not  charged 
that  the  steamship  rates  are  excessive,  poor  service  is  afforded, 
merchants  claim,  and  there  have  been  no  striking  indications  of 
a  fierce  competition,  to  say  the  least. 

For  years  the  people  of  the  Pacific  coast  have  been  buoyed 
up  with  the  hope  that  with  the  completion  of  the  great  Panama 
Canal,  being  constructed  with  the  money  of  the  people,  a  new 
era  of  prosperity  would  dawn  for  those  States  bordering  upon 
the  Pacific  Ocean.  Confidently  they  look  to  the  completion  of 
that  great  artificial  waterway,  with  the  expectation  that  it 
will  solve  that  mighty  problem  of  transportaion  charges  in 
transcontinental  shipping.  Shortening  the  distance  between  New 
York  and  San  Francisco  7,813  miles  by  water  when  compared 
with  the  route  by  the  Straits  of  Magellan,  and  bringing  San 
Francisco  within  fourteen  days  of  New  York  by  steamers  mak- 
ing 16  knots,  it  is  not  to  be  wondered  at  that  the  people  are, 
with  a  keen  interest,  following  the  progress  of  the  work  on  the 
Isthmus. 

Our  California  fresh  fruits,  in  steamers  with  cold-storage 
facilities,  will  reach  the  eastern  markets  as  quickly  as  they 
are  now  transported  by  rail,  and  at  greatly  reduced  rates.  Vast 
possibilities  are  opened  up;  but  if  the  transcontinental  roads 
are  to  be  unrestricted  in  their  present  practices,  if  the  strong 
arm  of  the  law  can  not  be  invoked  to  prevent  the  control  of  the 
competing  water  lines  when  the  canal  is  thrown  open  to  traffic, 
then  this  great  waterway,  the  hope  of  shippers  since  its  in- 
ception, will  prove  of  small  value  as  a  rate  regulator,  and  the 
benefits  confidently  expected  will  not  inure  to  the  shipper  or  the 
public.  This  section  in  a  large  measure  will  meet  the  conditions. 

Mr.  Chairman,  I  am  not  one  of  those  who  fear  any  sinister 
design  or  can  discover  any  deep-laid  plot  in  the  latter  provi- 
39280—8953 


12 

gions  of  this  section  which  give  to  the  court  of  commerce  the 
power  of  determining,  when  application  is  made  by  common 
carriers,  whether  proposed  consolidations  are  in  violation  of 
the  section.  If  the  section  retained  provisions  it  originally 
contained,  I  might  then  have  entertained  some  fear  that  its 
effectiveness  would  be  lessened,  although  the  danger  would 
have  been  slight.  I  refer  particularly  to  words  which  were 
intended  to  modify  the  prohibition  contained  in  the  first  part 
of  the  section,  the  language  referred  to  being  that  in  determin- 
ing the  question  of  a  consolidation  the  court  might  consider  the 
relative  importance  of  any  benefit  to  the  public  interest  and  of 
any  effect  upon  competition  resulting  from  such  acquisition. 

These  words  have  been  stricken  out,  and  the  commerce  court 
can  now,  I  take  it,  consider  only  the  question  as  to  whether  the 
line  to  be  acquired  is  directly  and  substantially  competitive. 
That  there  should  be  such  a  determination  is  apparent  when  we 
take  into  consideration  certain  facts.  Practically  every  railroad 
in  the  United  States,  and  many  water  carriers,  taken  by  them- 
selves and  through  their  connections,  might  be  claimed  to  be  in 
competition,  in  the  broad  sense,  with  every  other  road  or  water 
carrier.  No  one,  I  take  it,  and  particularly  no  one  from  the 
great  West,  would  want  to  enact  a  law  containing  prohibitions 
of  this  character,  unless  there  was  some  elasticity — an  elasticity 
that  would  allow  a  road  to  extend  its  system  in  the  development 
of  a  section  of  the  country  by  acquiring  a  feeder,  for  instance, 
when  such  feeder  was  in  no  sense  "  directly  and  substantially," 
competitive. 

Prospective  purchasers  of  bonds  would  unquestionably  desire 
a  decision  upon  this  point,  and  the  railroads  are  entitled  to  a 
determination  by  some  competent  body.  It  is  in  the  interest  of 
future  railroad  development  upon  which  the  prosperity  of  the 
Nation  in  such  a  large  measure  depends.  The  determination  of 
the  court  will  be  largely  upon  questions  of  fact,  upon  evidence 
presented,  and  I  have  full  confidence  that  the  Government, 
through  the  Attorney-General  and  his  representatives,  will  per- 
form its  full  duty  in  presenting  evidence,  if  such  evidence  is  ob- 
tainable, that  the  road  or  water  carrier  sought  to  be  acquired 
is  directly  and  substantially  competitive  with  the  road  of  the 
carrier  applying  to  the  court.  I  am  frank  to  admit  that  some 
little  doubt  exists  in  my  mind  as  to  whether  the  Interstate 
Commerce  Commission  should  not  be  substituted  in  this  section 
for  the  commerce  court,  but  I  do  not  regard  it  as  a  vital 
question. 

It  is  generally  admitted,  I  think,  by  those  who  have  studied 
the  transportation  problem  with  care  that  there  exists  great 
need  of  exercising  some  kind  of  control  over  railroad  capitaliza- 
tion. It  is  necessary  for  the  protection  of  the  investor,  and 
pne  need  not  bestow  much  thought  upon  the  problem  to  realize 
that  such  control  will  have  at  least  an  indirect  influence  upon 
the  question  of  railroad  rates.  The  latter  sections  of  the  bill 
deal  with  this  subject,  and  while  Congress  is  entering  upon  a 
new  field,  it  is  apparent  that  we  are  justified,  in  view  of  the 
abuses  which  have  prevailed  in  the  overcapitalization  of  rail- 
roads. 

This  bill  deals  with  questions  of  vital  interest  to  the  Amer- 
ican people.  With  a  full  realization  of  the  importance  of  the 
39280—8953 


13 

subject  the  Committee  on  Interstate  and  Foreign  Commerce  has 
given  to  the  various  provisions  of  the  bill  its  best  thought. 
For  nearly  three  months  the  measure  has  been  before  the  com- 
mittee. The  printed  testimony  covers  over  1,400  pages.  Every 
line  of  the  bill  was  considered  with  the  utmost  care.  The  mem- 
bers of  the  committee,  representing  the  majority  as  well  as 
minority,,  have  been  prompted  only  by  the  most  patriotic  mo- 
tives in  their  efforts  to  present  to  the  country  a  measure  in  the 
interest  of  the  people,  and  one  that  at  the  same  time  attempts 
to  deal  justly  with  common  carriers.  Where  differences  of 
opinion  prevailed  in  the  committee  they  have  been  honest  differ- 
ences, and  the  good  faith  of  no  member  can  be  questioned. 

All  legislation  is  a  matter  of  compromise;  no  important  bill 
ever  passed  this  House,  embodying  many  separate  provisions, 
where  every  section  suited  every  Member,  but  we  generally  ask 
ourselves  if,  on  the  whole,  the  proposed  legislation  is  not  an 
improvement  over  existing  conditions  or  statutes,  and  when  we 
answer  in  the  affirmative,  as  I  believe  an  overwhelming  ma- 
jority of  the  membership  of  this  House,  taking  the  broad  view 
and  considering  the  greatest  good  to  the  greatest  number,  in- 
tends to  do  in  this  instance,  we  will  be  but  continuing  those 
progressive  policies  which,  during  the  past  decade  alone,  have 
so  redounded  to  the  glory  of  our  Nation.  [Applause.] 
39280—8953 

o 


